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Big Three (automobile manufacturers)
The Big Three, when used in relation to the US automotive industry, most generally refers to the three major American automotive companies: Ford, General Motors, and Chrysler.Bill Vlasic, Once Upon a Car: The Fall and Resurrection of America's Big Three Auto Makers--GM, Ford, and Chrysler, William Morrow, ISBN 0-06-208860-2 The term is also sometimes used in relation to the three major automakers of other countries. United States and Canada Ford, General Motors, and Chrysler are often referred to as the "Big Three" or, more recently the "Detroit Three", being the largest automakers in the United States and Canada. They were for a while the largest in the world and two of them are still a mainstay in the top five. Ford has held the position of second-ranked automaker for the past 56 years, being relegated to third in North American sales, after being overtaken by Toyota in 2007. That year, Toyota produced more vehicles than GM, though GM still outsold Toyota that year, giving GM 77 consecutive calendar years of top sales. For the first quarter of 2008, however, Toyota overtook GM in sales as well. In the North American market, the Detroit automakers retained the top three spots, though their market share is dwindling. Honda passed Chrysler for the fourth spot in 2008 US sales. Since then, because of Toyota's woes with their recent unintended acceleration recall, Toyota has fallen back to fourth place in sales, with Honda trailing in fifth place, allowing the Detroit Three reclaim their Big Three title. The Big Three are also distinguished not just by their size and geography, but also by their business model. The majority of their operations are unionized (United Auto Workers and Canadian Auto Workers), resulting in higher labor costs than other multinational automakers, including those with plants in North America. The 2005 Harbour Report estimated that Toyota's lead in labour productivity amounted to a cost advantage of $350 US to $500 US per vehicle over American manufacturers. The UAW agreed to a two-tier wage in recent 2007 negotiations, something which the CAW has so far refused. Delphi, which was spun off from GM in 1999, filed for Chapter 11 bankruptcy after the UAW refused to cut their wages and GM is expected to be liable for a $7 billion shortfall. In order to improve profits, the Detroit automakers made deals with unions to reduce wages while making pension and health care commitments. GM, for instance, at one time picked up the entire cost of funding health insurance premiums of its employees, their survivors and GM retirees, as the US did not have a universal health care system. With most of these plans chronically underfunded in the late 1990s, the companies have tried to provide retirement packages to older workers, and made agreements with the UAW to transfer pension obligations to an independent trust. In 2009, the CBC reported that the non-unionized Japanese automakers, with their younger American workforces and fewer retirees will continue to enjoy a cost advantage over the Big Three. Despite the history of their marques, many long running cars have been discontinued or relegated to fleet sales , as the Big Three shifted away resources from midsize and compact cars to lead the "SUV Craze". Since the late 1990s, over half of their profits have come from light trucks and SUVs, while they often could not break even on compact cars unless the buyer chose options. Ron Harbour, in releasing the Oliver Wyman’s 2008 Harbour Report, stated that many small “econoboxes” of the past acted as loss leaders, but were designed to bring customers to the brand in the hopes they would stay loyal and move up to more profitable models. The report estimated that an automaker needed to sell ten small cars to make the same profit as one big vehicle, and that they had to produce small and mid-size cars profitably to succeed, something that the Detroit three had trouble doing. SUV sales peaked in 1999 but have not returned to that level ever since, due to high gas prices. The Big Three have suffered from perceived inferior initial quality and reliability compared to their Japanese counterparts, which has been difficult to overcome. They have also been slow to bring new vehicles to the market, while the Japanese are also considered the leader at producing smaller, fuel-efficient cars. Falling sales and market share have resulted in the Big Three's plants operating below capacity (GM's plants were at 85% in November 2005, well below the plants of its Asian competitors), leading to production cuts, plant closures and layoffs. They have been relying heavily on considerable incentives and subsidized leases to sell vehicles. which was crucial to keeping the plants running, which in turn drove a significant portion of the Michigan economy. These promotional strategies, including rebates, employee pricing and 0% financing, have boosted sales but have also cut into profits. More importantly such promotions drain the automaker's cash reserves in the near term while in the long run the company suffers the stigma of selling vehicles because of low price instead of technical merit. Automakers have since been trying to scale back on incentives and raise prices, while cutting production. The subprime mortgage crisis and high oil prices in 2008 resulting in the plummeting popularity of best-selling trucks and SUVs, perhaps forcing automakers to continue offering heavy incentives to help clear excess inventory. The Big Three sued California Governor Arnold Schwarzenegger to prevent a tailpipe emissions requirement. In response, Governor Schwarzenegger told the Big Three to "get off their butt".Arnold Schwarzenegger at LA Auto Show 60 Minutes Interview Energy Green - YouTube video In 2008, with high oil prices and a declining US economy due to the subprime mortgage crisis, the Big Three are rethinking their strategy, idling or converting light truck plants to make small cars. Due to the declining residual value of their vehicles, Chrysler has stopped offering leases on its vehicles.Plummeting Resale Values Lead Chrysler to End Leases. 27 July 2008. Nick Bunkley. 26 July 2008. In 2009, General Motors and Chrysler filed for and emerged from Chapter 11 restructuring in the United States. General Motors of Canada did not file for bankruptcy. The United States and Canadian government control are reported as temporary. On June 10, 2009, Chrysler Group LLC emerged from a Chapter 11 reorganization bankruptcy and was sold to the Italian automaker Fiat. On June 3, 2011, Fiat bought out the remaining U.S. Treasury’s stake in Chrysler for $500 million increasing its ownership of the automaker to 53%. In April 2012, GM and Ford continued to lose market share as sales were down 8.2% and 5.3% year over year respectively. There have been no independent car makers other than Ford, GM, and Chrysler since the last independent automaker, American Motors, was bought by Chrysler in 1987. Japan Japanese automakers Toyota, Nissan, and Honda, among many others, have long been considered the leaders at producing smaller, fuel-efficient cars. Their vehicles were brought to the forefront, due to the 1973 oil crisis which had a major impact on the auto industry. For instance, the Honda Civic was considered superior to American competitors such as the Chevrolet Vega and Ford Pinto. The Civic is the best-selling car in Canada for 12 years in a row. As well, the Nissan 240Z was introduced at a relatively low price compared to other foreign sports cars of the time (Jaguar, BMW, Porsche, etc.), while providing performance, reliability, and good looks. This broadened the image of Japanese car-makers beyond their econobox successes, as well as being credited as a catalyst for the import performance parts industry. Before Honda unveiled Acura in 1986, Japanese automobiles exports were primarily economical in design and largely targeted at low-cost consumers. The Japanese big three created their luxury marques to challenge the established brands. Following Honda's lead, Toyota launched the Lexus name with the LS 400 which debuted at $38,000 in the U.S. (in some markets being priced against mid-sized six cylinder Mercedes-Benz and BMW models), and was rated by Car and Driver magazine as better than both the $63,000 Mercedes-Benz 420 SEL and the $55,000 BMW 735i in terms of ride, handling and performance. It was generally regarded as a major shock to the European marques; BMW and Mercedes-Benz's U.S. sales figures dropped 29% and 19%, respectively, with the then-BMW chairman Eberhard von Kuenheim accusing Lexus of dumping in that market. Nissan's Infiniti became a player on the luxury market mostly thanks to its popular Q45. The vehicle included a class-leading (at the time) 278 hp (207 kW) V8 engine, four wheel steering, the first active suspension system offered on a motor vehicle, and numerous interior luxury appointments. These made it competitive against the German imports like Audi, BMW and Mercedes-Benz, which by the time of Infiniti's release had overtaken Cadillac and Lincoln in dominating the luxury segment of the American market. In 1990, four years after the debut of the Legend and Integra, Acura introduced the NSX, a midship V6 powered, rear-wheel-drive sports car. The NSX, an acronym for "New Sports eXperimental", was billed as the first Japanese car capable of competing with Ferrari and Porsche. This vehicle served as a halo car for the Acura brand. The NSX was the world's first all-aluminum production car, and was also marketed and viewed by some as the "Everyday Supercar" thanks in part to its ease of use, quality and reliability, traits that were unheard of in the supercar segment at the time.The Legend was built on the Accord platform, and the Integra was built on the Civic platform. Acura History page > timeline The success of the Japanese automakers contributed to their American counterparts falling into a recession in the late 1970s. Unions and lobbyists in both North America and Europe put pressure on their government to restrict imports. In 1981, Japan agreed to Voluntary Export Restraints in order to preempt protectionism measures that the US may have taken, where it be tariffs or import quotas. Consequently, Japanese companies responded by investing heavily in US production facilities, as they were not subject to the VER. Unlike the plants of domestic automakers, Japanese plants are non-unioned (save for NUMMI), so they have lower wage expenses and do not face the risk of strikes. The VER was lifted in 1994 upon agreement of all members of General Agreement on Tariffs and Trade (GATT). Establishing US production facilities was also a significant step in improving public relations, along with philanthropy, lobbying efforts, and sharing technology. Europe has still largely maintained its protectionism policies against Japanese cars, though their varies considerably. Toyota has always been by far Japan's largest automaker, and it recently overtook perennial world leader GM in both production and sales by early 2008. As the most aggressive of Japan's companies when it came to expanding into light trucks and luxury vehicles, this proved largely successful. Their high-end brand Lexus became the top-selling luxury marque worldwide in 2000, despite being only started up in 1989. Consequently, Toyota's stock price has traded at a much higher premium than other automakers. Nissan regained its position on second place, financial difficulties in the late 1990s caused it to lose its place to Honda before. Nissan is Japan’s second largest automaker and ranks sixth in the world, behind Toyota, GM, Volkswagen, Ford, and Hyundai. Suzuki, Mazda, and Mitsubishi are in a distant fourth, fifth, and sixth place compared to the Japanese Big Three. Toyota, Honda, and Nissan are all in the BusinessWeek magazine's The 100 Top Global Brands by dollar value, as ranked by leading brand consultancy Interbrand. The Toyota marque was valued at US$22.67 billion, ranking it ninth among all global brand names - automotive or non-automotive, edging out that of Mercedes-Benz. 2010 end of year production figures from the International Organization of Motor Vehicle Manufacturers shows that Toyota holds the number 1 spot, Nissan number 6, and Honda number 7. Germany The German trio Audi, Mercedes-Benz and BMW are often referred to as "Germany's Big Three", although the actual major automobile manufacturers are the Volkswagen Group (producer of Audi), Daimler AG (producer of Mercedes-Benz), and BMW. Volkswagen Group has long been the largest automaker in Europe. As of 2007 it edged out Ford to rank third in the world after General Motors and Toyota. It is also the parent group of Audi, Porsche, SEAT, Škoda, Bugatti, Lamborghini and Bentley. Daimler AG holds major stakes in other automakers including Mitsubishi Fuso. BMW also produces MINI branded vehicles, and has been the parent company of Rolls-Royce Motor Cars since 1998. BMW, Mercedes-Benz and Audi make up about 86% of the luxury midsize market. Notes See also * Automotive industry * Automotive market * Effects of the 2008-2009 automotive industry crisis on the United States Category:Automotive industry Category:Car manufacturers of the United States